Sujesh Vasudevan, president of Formulations Glenmark warned in 2015 about the looming threat from the Chinese pharmaceutical sector.
“China appears to have realized that there is not much value in active pharmaceutical ingredients and it is time for moving up the value chain.”
In the period between 2011 to 2015, Chinese firms aggressively poached top Indian pharmaceutical scientists with up to 3x higher pay and benefits. China’s pharmaceutical market has been growing at an alarming rate which is a major problem for developing nations and even more so for India.
Expected statistical figures value the Chinese pharma market at 161 billion by 2023 with at least 30% global market share. Generic medicines dominate more than 90% of total pharmaceuticals in china and with more than 5000 small and medium manufacturers, R&D funding is less than 5% of average sales
As one of the fastest-growing markets among emerging countries, China attracted increasing attention from around the world. Supportive national policies, economic growth, ageing population, and global trends have contributed to an increased output of nearly seven‐fold, from 2.5% in 1995 to 18.3% in 2010. China is now the second-largest pharmaceutical market in the world only to be rivalled by the USA.
In 2016, the income of large scale industrial enterprises reached (2.96 trillion RMB), an increase of 9.92%. In the field of biopharmaceuticals, sales revenue was considerably high and reached (229 billion RMB ) in 2013. According to empirical models, technology innovation was one of the key factors in upgrading pharmaceutical industries in China.
One other key factor that contributes to China’s success is its opening up to the world. Currently, 20 multinational pharma companies have set up joint ventures and most have transformed into wholly-owned business models that occupy key regional and high-end product markets in China such as Astra Zeneca, GlaxoSmithKline, and Eli Lilly.
Where does India stand in the race of pharmaceutical domination?
India once accounted for only 5% of the global pharmaceutical market, but now the figures have changed to 15%. Covid has opened doors for further expansion and India is focusing on completing the trial of its Covid Vaccine and hopes to hit the market by the end of 2021.
The Indian pharmaceutical industry has been growing at a steady rate of 13-14% over the last 5 years. It has the potential to reach 70 billion USD provided polices are implemented that favour the positive movement of the industry and the overall country’s economy.
Population growth coupled with disease pervasiveness will increase the patient pool by nearly 20% by 2021. Drugs will become more affordable if there is a steady growth GDP at 8% at least as more and more households push into middle and high-income segments. This scenario strongly depends on growth in GDP and incomes, insurance coverage, and government and private sector spending on healthcare.
Obstacles in China’s pharmaceutical expansion and how India can benefit
The disproportionate development of homogeneous generic drugs resulted in over-capacity of the same products, which catalyzed the unordered market competition. Many manufacturers provided the same type of generic drugs, each manufacturer acquired only minimal profit margins.
The funding system poses a notable challenge to drug innovation in China. Improper capitals arrangement was prevalent and usually resulted in the inefficiency of new drug R&D. Public investment was the main financial source for R&D institutes in the pharmaceutical sector, of which more than 81% R&D expenditure was accounted for with government funding and private investment only accounted for 5.41% in 2012. The Chinese government has now implemented measures for increasing resources into R&D institutions. This allocation of capital resulted in China opting for new regulations that would give its firms exclusive control over their clinical test data, which might lead to an increase in production costs for formulations and steer China away from a generic pharma status like India’s.
Huge fragmentation of the industrial composition, small R&D intensity, and serious product uniformity are the major hurdles in china’s path.
What does the future hold?
India’s pharmaceuticals market has developed firmly and moved on to an expedited growth route. the question now rests around the ability of the Indian government to manage and stimulate the growth of the country’s economy.
Every step our government takes is foundational and will play a pivotal role in defining the movement of market growth.